What is the chancellor going to do when figures charting Britain’s economic growth in February show the recovery from the pandemic was almost at a standstill before the invasion of Ukraine had started?
Shopping and eating out became popular again after the restrictions put in place to deal with the Omicron outbreak were eased. Bookings at arts and entertainment venues increased. And the banking, insurance, legal and accounting sectors experienced another month of solid expansion, no doubt allowing City firms to repeat in 2022 the stellar bonuses paid to staff last year.
However, manufacturing shrank and so, too, did the wider production sector as energy-hungry businesses cut back on their use of gas and electricity to leave GDP only 0.1% higher in February.
Consumers were also beginning to feel the pinch from rising heating bills. The better-off might have ventured out to restaurants or to catch a show but separate figures from the Bank of England show many families were ramping up their borrowing on credit cards in February just to keep their heads above water.
Trade with Europe increased modestly month on month, which some analysts said was a welcome sign of a return to more normal times post-Brexit.
That was not the view of the British Chambers of Commerce (BCC), which said a broader view of imports and exports with EU countries showed UK firms continued to struggle with the red tape left in place after the decision to quit the EU single market and customs union.
Clearly, queues of lorries at Dover, some with rotting meat and vegetables on board, has nothing to do with the cost of living crisis or the war in Ukraine and everything to do with the prime minister’s decision to push for a hard Brexit.
Rishi Sunak, meanwhile, is frustrated that demands for him to take further action fail to recognise all the subsidies he has put in place over recent months.
There is £22bn of support from the government, he says, ranging from the 5p cut in fuel duty, at a cost of £2.4bn, to the freeze on alcohol duty that will knock £3bn from government revenues over five years.
Of course, most of the £9bn energy subsidy to households is in the form of a loan and will be clawed back by the exchequer. Nevertheless, he argues the whole package does enough to keep the economy afloat.
Business groups are clear that the severity of the situation means he needs to go further, especially now that Russia’s invasion is on course to be prolonged, bringing with it further sanctions on the aggressor.
Not only should there be a cap on household energy bills, there should be a cap for small businesses as well, the BCC said.
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The Confederation of British Industry said there should be more generous allowances to boost investment in new plant and machinery and a revised apprenticeship levy, to get round the red tape created by Theresa May’s failed plan to boost workplace training.
Sunak, still coping with revelations about his personal finances, is expected to sit tight. Meanwhile, inflation is soaring and the Bank of England has signalled its response will be to increase interest rates again in May.
All that adds up to an even bigger cost of living crisis in the months to come.
